Saba Ahmad is a Litigator working on environmental, administrative and commercial matters in Toronto. Learn more at www.sabaahmad.com
JS’s solely-owned company was engaged in a litigation with its former landlord, with claims on both sides.
The landlord won a security for costs motion along the way. The company was insolvent, so JS loaned it $15,000.00, which was paid into court.
At the end of the litigation, both sides received judgments, with the net result that the landlord was owed over $26,000.00. No costs.
Since JS’s company had no money, the landlord sought to receive the money that had been paid into court.
The motions judge ruled in favour of the landlord, but the Divisional Court reversed. It considered an old English decision called “Quitclose” – for which Quitclose Trusts are named. If this had been a traditional Quitclose Trust, the landlord could not receive the money if it had knowledge that JS had advanced the funds for the specific purpose of providing his company with the security for costs. In this case, the landlord did not have such notice. Strictly speaking, JS’s payment could not have established a Quitclose Trust.
The Divisional Court ruled that notice did not matter because the three certainties existed: intention, subject matter, and objects. JS advanced the funds for a limited purpose and he never lost ownership of the funds by doing so. Subsequent case law had broadened the parameters of Quitclose Trusts and the court rejected the strict requirement of notice to prevent an injustice.
Interestingly, the court did not award JS any costs. Costs typically follow the event – but that rule, it seems, is also unevenly applied.